Australia’s performance and position across key economic and financial related indicators.

Points of interest include:

On 1 February, the Reserve Bank of Australia kept its benchmark interest rate unchanged at 4.75 per cent. The RBA noted that inflation is consistent with the medium-term objective of monetary policy, having declined significantly from its peak in 2008. The Bank commented that it will continue to assess the near-term impact on growth and prices of flooding across the nation’s east coast. The Bank’s preliminary assessment is that the net additional demand from rebuilding is unlikely to have a major impact on the medium-term outlook for inflation.

Australia’s inflation rate eased in the three months to December 2010, the Australian Bureau of Statistics reported. Consumer prices rose by 0.4 per cent from the preceding quarter, the slowest quarter-on-quarter pace since the first quarter of 2009. In year-on-year terms, prices rose by 2.7 per cent, marginally down from 2.8 per cent in the quarter to September. The RBA expects that inflation over the year ahead will continue to be consistent with the 2-3 per cent target.

Australia’s unemployment rate remained stable at 5.0 per cent in January 2011 despite the participation rate rise from 65.8 per cent to 65.9 per cent.

Australia’s exports of goods and services grew 14 per cent to a record of A$284 billion in 2010. The surge was led by strong export growth of metal ores and minerals, up 50 per cent to A$69 billion; and coal, which climbed nine per cent to A$43 billion. Australia’s trade performance for 2010 ended strongly, with a seasonally-adjusted surplus of A$2 billion in December. Trade Minister Dr Craig Emerson said, “This is Australia’s 9th consecutive monthly trade surplus, marking the longest run of monthly trade surpluses since the early 1970s.” Australia recorded an annual trade surplus of A$16.6 billion in 2010, a significant turnaround from deficits of A$3.7 billion, A$8.6 billion and A$21.4 billion in 2009, 2008, and 2007 respectively.

Australia’s ranks third in the 2011 Economic Freedom Index with an average score of 82.5; and its score is well above the regional and world averages. Our ranking reflects the robust supervision and sound regulation of Australia’s banking system which has coped well with the financial turmoil. The Government’s budget deficit and total stock of debt as a share of GDP are much lower than those of other major economies. Australia’s modern and competitive economy performs well on many of the 10 economic freedoms. The country has a strong tradition of openness to global trade and investment. An independent judiciary protects property rights and the level of corruption is low.

Australia advanced one spot in the Legatum Institute’s 2010 Prosperity Index to fourth place in the world out of 110 countries – behind Norway, Denmark and Finland. Countries were rated on the following: democratic institutions, economic fundamentals, education, entrepreneurship and innovation, governance, health, personal freedom, safety and security and social capital. Australia achieved the following top ten rankings: education (2nd), personal freedom (4th), social capital (4th), economic fundamentals (8th) and governance (8th).

Australia’s is now ranked at 5th out of 57 economies in the World Economic Forum’s Financial Development Index. Australia’s superior ranking is mainly attributable to the country’s solid scores in financial access (1st), financial markets (6th), banking (7th) and non-banking financial services (8th).